Bitcoin’s (CRYPTO: BTC) surge from around $58,000 over the summer to a September peak of $86,000 defied what appeared to be an increasingly difficult macro backdrop, including a Fed rate hike and rising Treasury yields.
VanEck Head of Digital Assets Research Matthew Sigel and former CFTC Chair Chris Giancarlo offered two explanations for the rally:
- Exhausted sellers and improving liquidity conditions on one hand, and
- Bitcoin’s growing appeal as protection against government debt and currency debasement on the other.
Why Did BTC Rally Despite Higher Rates?
Sigel attributed the bulk of Bitcoin’s nearly $30,000 move to seller exhaustion rather than any single headline.
VanEck tracks several BTC capitulation indicators, and Sigel said every one of them triggered over the summer.
"There were just no more sellers left," he added, pointing to the Treasury’s subsequent bond-buyback announcement as a catalyst that helped accelerate the recovery.
Sigel said Bitcoin has historically shown virtually no persistent correlation with bond yields. Instead, it’s more meaningful macro relationships have been a negative correlation with the U.S. Dollar Index (DXY) and a positive relationship with money supply.
M2 money supply began accelerating roughly three quarters ago, he noted, while Bitcoin typically reacts to liquidity changes with a lag.
That leaves the medium-term picture constructive, although Sigel cautioned that if interest rates continue climbing, "it’s not good for anything."
Could Rate Hike Strengthen BTC Case?
Giancarlo approached the rate question from a different angle in an interview with Bitcoin Magazine on Sep.24.
The former CFTC chairman argued that when the Fed raises rates, the government faces higher interest costs on its debt. That can require additional debt issuance and potentially reinforce concerns about long-term currency debasement.
Bitcoin, by contrast, has a programmed supply limit.
Giancarlo said that scarcity is one of Bitcoin’s central value propositions, particularly during periods of heavy government spending and currency debasement. He compared the dynamic with gold’s historical role as a scarce asset outside the fiat monetary system.
Bitcoin’s latest rally accompanying Fed rate hikes therefore may not be as contradictory as it initially appears, according to Giancarlo.
Higher interest costs can increase the government’s financing requirements, he said, and the prospect of further debasement can strengthen the case for an asset like Bitcoin that cannot have its supply expanded by policymakers.
Bitcoin Reclaims Key 50-Week Level
Sigel highlighted Bitcoin’s close above its 50-week moving average near $78,000, calling it a key “line in the sand” across previous cycles. Holding above it on a weekly basis would keep the technical outlook intact.
He also expects spot Bitcoin ETF demand to potentially return after options activity dominated the previous week.
Sigel said the recovery remains consistent with Bitcoin’s four-year cycle, while volatility has fallen roughly 50%. He expects volatility to decline further as institutional adoption grows.
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